The role and challenges of Rare Earths in the Energy

Transition

Lisa DEPRAITER∗ and Stéphane GOUTTE†

September 8, 2023
Abstract

The energy transition from fossil fuel energy to low-carbon energy is mineral
intensive. Among the required minerals rare earth elements (REEs) are core com-
ponents of clean energy technologies such as wind turbines and electric vehicles.
This article focuses on the relationship between rare earth elements and the energy
transition, while discussing demand and supply of these critical minerals in the en-
ergy transition process. We investigate the challenges regarding current and future
supply of REEs for low-carbon technologies. The stakes and challenges are numer-
ous between the Chinese quasi-monopoly, the absence of equivalent substitutes, the
low recycling rates or even the environmental damage linked to the extraction and
the production process. In the face of these issues, we propose concrete recommen-
dations and policies in order to meet the ecological challenge of the energy transition
and to ensure a reliable future supply.
Keywords: Rare Earths; Energy Transition; Supply; Renewable; Wind tur-
bines; Electric Vehicles; China; Environment

∗
UMI SOURCE, University Paris-Saclay, UVSQ, IRD, France.
†
UMI SOURCE, University Paris-Saclay, UVSQ, IRD, France and Paris School of Business, 59 Rue
Nationale, 75013, France.

1
1 Introduction

In the global development of low-carbon energy to achieve emission reduction targets,

minerals are seen as the vitamins to the energy transition. The criticality of raw ma-
terials has become a common issue in planning the transition from fossil fuel energy to
low-carbon energy. The past decade has seen several countries establish critical raw ma-
terials lists, including minerals critical to the development of low-carbon energy. Among
those minerals, rare earth elements have received a lot of attention. Rare earth ele-
ments (hereinafter referred to as REEs) are a group of 17 chemical elements, including
15 lanthanides (lanthanum, cerium, praseodymium, neodymium, promethium, samar-
ium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium,
lutetium) and scandium and yttrium. REEs are grouped into one family of elements due
to their chemical similarities. Rare earths are divided into two sub-categories : light rare
earths (cerium, lanthanum, praseodymium, neodymium, promethium, europium, gadolin-
ium and samarium), and heavy rare earths (dysprosium, yttrium, terbium, holmium, er-
bium, thulium, ytterbium, yttrium and lutetium). There has been an increasing interest
in rare earth elements due to their use in many advanced technologies, including low-
carbon technology, mainly in wind turbine generators and electric vehicle motors. REEs
are principally produced in China, and its political management of the resource has been
the focus of several geopolitical studies [58, 57, 41, 74, 80]highlighting the criticality of the
minerals. In addition, forecasting studies have drawn attention to the availability risks of
main REEs used for wind turbines and electric vehicles, and more generally, the challenges
surrounding rare earth elements supply [84, 83, 69]. Despite this large literature, few ar-
ticles focus on the challenges of rare earth in the energy transition concerning supply and
demand. This paper will focus on examining the role of rare earth elements in the energy
transition and discuss the induced challenges while identifying policy recommendations.
First, this paper gives a brief overview of REEs in the literature, the second section will
focus on the REEs market, examining its characteristics, and finally, the last section will
define the four main challenges identified: diversification, substitution, recycling and en-
vironmental and social concerns regarding rare earths mining to ensure a reliable future
supply.

2
 Figure 1: Mineral reserve abundance. Source: Gupta et al., 1992

2 Literature review

2.1 REEs occurrence, distribution and geology

There is an extended literature on rare earths occurrence, distribution, and geology [34,
26, 9, 20]. As explained by [34], despite their denomination REEs are not particularly
rare in their crustal abundance concentration compared to regular metals such as zinc and
copper. Crustal abundance concentration also varies among rare earth elements, the most
abundant cerium and the least thulium. Unlike regular minerals, rare earths do not occur
as individual minerals; hence rare earth minerals contain all REEs, with some enriched
and others in low concentration [34]. The consequence, as highlighted by several papers
[77, 32], is that the unequal repartition distribution of REEs compromises the isolation
and recovery of individual REEs, which results in their unequal availability. Globally,
rare earths rarely occur in concentrated and economically exploitable mineral deposits. As
shown by [48] REEs deposits are located in the interior and marginal regions of continents,
including Inner Mongolia, East African rift zones, northern Scandinavia-Kola peninsula,
Eastern Canada, Southern Brazil and Southern China.[9, 34] state that overall there are
250 minerals identified as containing REEs, but only a dozen are considered resources
for commercial extraction. According to [34, 26], the most common rare earth minerals
and the principal economic source of REEs are Monazite, Bastnaesite, Xenotime and
Ion-adsorption clay. Others include Euxenite, Apatite, Gadolinite, Laporite, Uraninite,

3
Brannerite, Doverite, Pyrochlore, Allanite, Perovskite, Zircon.

4
Figure 2: Current global distribution of REE projects, including both active mines and
advanced projects. Sources: Adapted from Liu and al. 2023

5
 Figure 2 represents the Global REE distribution, including active mines and advanced
projects. The three major deposits include Bayan Obo (China), Mountain Pass (USA)
and Mount Weld (Australia). Bayan Obo deposit is located northwest of Baotou, a
northern China industrial region, in the Inner Mongol Autonomous Province [48, 20].
The Mountain Pass deposit, located in the Mojave Desert of California, is the second-
largest deposit in the world and the only REE-mine in the United States [20]. Mount
Weld comprises four deposits, the main REEs mineral being monazite. This deposit is
enriched in heavy rare earths [20, 21], and it’s the only heavy rare earths mine outside
China. Another important resource of REEs outlined by [76, 91] is the ion adsorption clay
deposit that stretches along seven provinces in southern China. The easy extractability of
rare earths, and notably heavy rare earths, from this deposit makes it more economically
viable compared to others. Rare earth can be retrieved from the surface clay with a few
mining separation processes. Between 1988 and 2008, this deposit accounted for 26%
of China’s REEs production [76]. According to [16], the global reserve of rare earth is
estimated at 120 million metric tons. China owns the largest reserve with 44 million
metric tons, followed by Vietnam ( 22 million metric tons), then Russia and Brazil with
21 million metric tons. Further, India, Australia, the United States and Greenland’s
individual reserves exceed 1 million metric tons.

2.2 REES applications

The wide applications of rare earths in traditional sectors, including metallurgy, petroleum,
textiles and agriculture, stem from REEs specific and diverse properties such as lumines-
cence, hydrogen storage, high thermal stability, electric conductivity, magnetic, and op-
tical properties [9, 8]. Their unique chemical, electrical, magnetic and optical properties
have led to a growing use of the minerals in high-tech industry [87]. Their applications
include minor and major components in permanent magnets, high-temperature supercon-
ducting magnets, wires, and cables. REEs are present in many everyday technologies,
for instance, all of them are used in flat-panel TVs [9] and several compounds of REEs
are used in smart batteries. Similarly, hybrid cars, wind turbines, compact fluorescent
lights, mobile phones, and disc drives also contain REEs. The use of REEs in modern
technologies has grown because their properties enable serious technical advantages such
as performing at reduced energy consumption, greater efficiency, miniaturization, speed,
durability and thermal stability [9]. Some products require a single element of rare earths,
while others require a mixture of REEs. For instance, cerium is used alone as a polishing
agent for glass, contrary to neodymium-praseodymium alloy used in permanent magnets
or europium-terbium-yttrium combination in REEs phosphors. REEs are always used
in small quantities, and some individual elements are critical to the production of one

6
particular technology. For example, erbium is the only element with the optical prop-
erties necessary to make laser repeaters work [87]. Due to the growing use of REEs in
clean technology, these minerals have become critical resources for the energy transition.
Similarly, their use in the defence sector has increased their economic criticality.

2.3 REEs production

The current legal annual global production of rare earth oxide is estimated at 280 000 tons
[16], of which China accounts for 60%, USA 16%, Myanmar 9%, Australia 8% and 3% for
Thailand. The production of rare earths includes exploration, extraction and all following
processing stages (beneficiation, chemical treatment, separation, purification and refining)
[77]. Extraction, concentration and processing are often specific to a deposit type or even
single deposit resources. The extraction process is influenced by both cost considerations
and requirements of technical performance. REEs processing is expensive due to low
concentration of rare earths ore deposits, chemical similarities of elements as well as
high-purity single-element products required for the high-tech industry. The mining of
individual elements is economically inefficient ; hence it is not possible to selectively target
just one single element of the REEs family. As previously stated, the processing cost for
bastnaesite and monazite deposits largely exceeds the processing cost for ion adsorption
clays. In addition, the exploitation of certain deposits generates radioactive waste, which
must be managed at a high cost.

2.4 Critical raw minerals

2.4.1 Criticality

There is no single definition for critical minerals, contrary to the concept of strategic
minerals associated with the availability of certain materials used in the military and
industry in times of war or national emergency [18]. Despite the lack of a common
definition, [38] characterizes a critical mineral as a “valuable constituent element of a
mineral commodity that is subject to the risk of supply disruption and which serves
a purpose deemed as important based on the evaluators’ perspective”. Accordingly, a
mineral is critical when it has an essential function and has few or no substitutes. Besides
specific needs and high demand, minerals are critical if there is a high probability of
supply risk, mostly due to geologic, technical, political or economic factors. The notion
of criticality also refers to the question: to whom is a mineral critical? The answer is
an industry but more broadly, an entire economy. Therefore, countries, academics, and

7
private sectors assess mineral criticality according to their definition and criteria. Several
countries have developed a List of Critical Raw materials for the last decade, including
the United States, the European Union, Japan, Australia, the United Kingdom, and India
[14, 33, 56, 35]. These lists generally evaluate criticality through two dimensions: supply
risk and economic importance. For each dimension, indexes and indicators are developed
to assess the criticality of minerals or groups of minerals, and the results are then presented
in a matrix. Lists of critical minerals are revised frequently since criticality may evolve
according to market dynamics, technological changes and political decisions. A third
dimension of the analysis exists; it considers the environmental hazard and damage of
the mining activities [59]. The criticality of rare earths is among the highest concerning
the three dimensions. Figure 3 shows the results of the European Commission’s 2023
criticality assessment. The matrix is quite similar to the criticality matrix from U.S.
Department of Energy(Figure 4).It is apparent from the European Commission matrix
that HREEs and LREEs are markedly above the criticality threshold. Both have a high
supply risk, but LREEs have greater economic importance. The economic importance
of REEs has increased since the previous criticality assessment due to the growing use
of REEs in permanent magnets application. The lack of substitutes for each individual
rare earth for each application also contributes to rare earth’s rising economic importance.
Supply risk remains high for REEs since China provides 100% and 85% of the EU’s supply
of HREEs and LREEs, respectively. Considering both dimensions, rare earths are among
the most critical raw materials. Along with the other minerals needed, such as cobalt,
lithium, manganese, and graphite, rare earths are especially important for the energy
transition .

8
Figure 3: Criticality assessment results, European Commission (2023)

9
Figure 4: Medium term(2025-2035) criticality matrix, DOE (2023)

10
2.4.2 The geopolitics of Rare earths

One of the most significant current discussions regarding critical minerals and particularly
rare earth elements is the geopolitical shift emerging from the energy transition. According
to [36], deploying renewables could replace countries’ dependence on fossil fuel resources
with dependence on mineral resources, creating new relationships between resource-rich
countries and others. Regarding REEs dependence, the attention is confined to China’s
central role in the market and its protectionist measures [40, 41, 57, 58, 47, 75, 28]. The
general conclusion of these studies is that countries reliant on China’s rare earths would
have to reshape resource policies and forge new alliances to reduce their dependence on
China’s resources and avoid putting their economies at risk of supply disruption.

3 Rare Earth and the Energy Transition

3.1 Energy transition

Under the Paris Agreement, 175 nations reinforced the global response to climate change
to limit the increase of global warming temperatures to under 2°C above pre-industrial
levels. To reach this goal, they have shaped national and international policies built on
two pillars: mitigation and adaptation. Mitigation is carried out through decarbonisation
roadmaps, such as the large-scale development of low-carbon energy as a substitute for
fossil fuel energy [31, 70]. Specifically through the European Green Deal, The Anti-
Inflation Act, the Canadian Net-Zero Emissions Accountability Act, and the Carbon
neutrality target before 2060. These policies set the pathway for an energy transition. This
is defined by the International Renewable Energy Agency (IRENA) as a ’pathway toward
the transformation of the global energy sector from fossil-based to zero-carbon by the
second half of this century’ [30]. Higher energy efficiency and a higher share of renewable
energy are the two pillars of this energy transition [29]. Rare earths contribute to both
pillars; first, their unique properties allow for a gain in efficiency, and second, they are
key components of renewable energy technologies. The global development of renewable
energy is rapidly increasing, intending to reach net zero emissions compared with the pre-
industrial era [94, 89, 53]. The share of renewables in total electricity generation should
globally increase from 29% in 2020 to over 60% in 2030 and to 88% in 2050 [44, 43].
Solar PV and wind will become the leading sources of electricity before 2030. To achieve
these results, annual wind and solar capacity additions between 2020 and 2050 will be
five times higher than the average addition over the last three years [44]. Likewise, the
transformation of the transport sector, notably the development of electric vehicles, will

11
also contribute to emission reduction. In a Net Zero Emission scenario, electricity becomes
the principal fuel in transport by 2040 [44].

3.1.1 REEs and minerals critical for the energy transition

Renewable energy technologies are more mineral intensive than current energy resources.
Consequently, transforming the electricity sector requires huge volumes of raw materials;
some are critical raw materials. In a scenario that meets the Paris Agreement goals, the
total mineral demand for clean energy will quadruple by 2040 [43]. In this scenario, min-
erals demand is driven by the energy and transport sector. Clean energy technologies’
share of total demand will rise to over 40% for rare earth elements and copper, 60- 70%
for nickel and cobalt, and almost 90% for lithium between 2020 and 2040 [43]. Although
these minerals are already considered critical, their criticality might increase due to their
expected economic importance in the energy sector and their high supply risk stemming
from their production concentration in certain regions. Rare earths are critical to the
energy transition through their use in permanent magnets. Permanent magnets trans-
form mechanical energy into electrical energy and operate in wind turbine generators and
EV motors. Neodymium, praseodymium, dysprosium and terbium are the four elements
included in the production of permanent magnets called Neodymium-iron-boron magnets
(NdFeB). Neodymium and praseodymium are the main components of these magnets
as they contribute to the magnetic strength, while dysprosium and, to a lesser extent,
terbium are added in smaller quantities to improve resistance to demagnetisation, partic-
ularly at high temperatures. Neodymium and praseodymium usually co-exist in mineral
deposits due to their similar properties. That’s why Nd-Pr alloy is used in permanent
magnets. However, dysprosium is far less abundant than other rare earth elements, and
its low availability may hinder the development of high-temperature NdFeB magnets for
EVs and wind turbines [6, 22]. In 2020, some 29-35% of all REEs were used for permanent
magnets [30].

3.1.2 Wind turbines

In 2020, around 10% of permanent magnets were used for wind turbines, notably off-
shore and Chinese onshore turbines [30]. Permanent magnets incorporate 29-32% of
Neodymium- praseodymium and 3-6% of dysprosium [64]. However, the amount of per-
manent magnets differs according to the type of wind turbine. There are two technical
designs of wind turbines in onshore and offshore applications: gearbox (GB) and di-
rect drive (DD). Gearbox turbines exist with mid-speed drive trains and high-speed drive

12
trains. The mid-speed gearbox consists of turbines with moderate permanent magnet con-
tent (GB – PMSG), while high-speed drives include a design with low permanent magnet
content and another one with no permanent magnet, called a double-fed induction gen-
erator (GB - DFIG). Direct drive turbines offer only a low-speed drive option with two
designs: a Permanent Magnet Synchronous Generator (DD-PMSG) and an Electrically
Excited Synchronous Generator (DD-EESG) as shown in Figure 5. Permanent magnet
use in wind turbines allows for smaller and lighter designs for the gearbox configuration
[64]. In offshore sites, turbines are taller and larger, therefore DD-PMSG are preferred
due to their lighter and more efficient attributes, as well as lower maintenance costs. In a
comparison between DFIG and PMSG turbines, [60] has shown that, for a hypothetical
100 turbine site 40km offshore, the PMG turbine has a Cost of Energy that is £2.31/MWh
lower than that of DFIG one. In general, PMSG wind turbines are more efficient than
other ones, specifically for offshore use. This greater efficiency is partly due to rare earth
elements’ strong magnetic properties and light weight. Currently, GB-DFIGs dominate
the market for onshore applications. However, DD-PMSGs have doubled their market
share over the past decade accounting for 10% of the installed turbines in 2010 to 20%
in 2020 [43]. The onshore wind capacity is set to triple by 2050, with PMSGs remaining
an important part of the onshore market. In the offshore market, PMSGs prevail over
GB-DFIGs. The global offshore wind market is expected to grow by over 13% annually by
2040 [42], reinforcing the development of DD-PMSGs in offshore sites since they present
greater advantages for offshore applications.

Figure 5: Wind sub-technologies subdivided according to their drivetrain configuration.

Source: Adapted from Manberger and Stenqvist (2018)

13
Figure 6: Rare earth usage estimates in t/GW for different wind turbine types. Source:
Carrara et al., 2020

Two main scenarios are anticipated regarding the development of the different wind
turbine types in the decades to come. In a scenario based on current policies and Paris
Agreement goals, PMSG wind turbines will represent 95% of offshore wind turbines in
2040, whereas this share is 30% for onshore turbines[43]. These projections correspond
with the fast and large-scale development of wind capacity and the need to gain efficiency
to meet the Paris Agreement goals. However, these projections assume that the supply of
critical raw materials, notably rare earths, would meet the demand for permanent magnet
production. In a rare earths constraint supply scenario, manufacturers would switch to
hybrid designs with fewer rare earths or wind turbine models without REEs components.
Therefore, according to [43], the share of PMSG wind turbines would fall under 20% for
the onshore market and remain around 90% in the offshore market but with greater use
of REE-free magnets. This would result in a 15% decrease in praseodymium demand and
32% decrease in dysprosium demand by 2040 [43]. These scenarios will depend on various
factors, such as mine development time frame, price variation, manufacturer technology
choices, and innovation development. Those conclusions are drawn on current market
development and the feasibility of short-term predictions. In contrast, [24] has developed
three different demand scenarios for wind turbines market shares taking into account the
future penetration of new technologies. As can be seen from Figure 7, PMSG offshore
application remains between 70-80% in medium and high-demand scenarios, whereas it
drops to 40% in the low-demand scenario.

14
Figure 7: Scenarios for the use of permanent magnets in wind turbines. Notes: HDS;
LDS and MDS are for High, Low and Mid Demand Scenarios. Sources: Adapted from
Carrara et al. (2020).

15
3.1.3 Electrical Vehicles

Permanent magnets used in electric vehicles (EVs) and hybrid vehicles (HVs) are different
from the ones used in wind turbines. Although they contain a large amount of neodymium
and praseodymium, dysprosium is sometimes replaced by terbium. Rare earth elements
can also be found in EV’s NiMH batteries along with lanthanum, cerium and neodymium
used for hydrogen storage, while europium and yttrium operate in LEDs. The average
amount of REEs contained in EVs are 580-870g lanthanum, 1226-821 g cerium, 189-135g
praseodymium, 649-555g de neodymium and 149-71g dysprosium [88]. EVs incorpo-
rate more REEs than conventional vehicles. Conventional vehicles have between 17-111g
of REEs compared to 2240-3200g in EVs[88]. There are two types of motors for EVs,
Permanent-magnet synchronous motors (PM) and asynchronous induction motors. Per-
manent magnets optimise the power-to-weight ratio in motors, allowing for lighter and
more efficient vehicles. Rare earth elements largely contribute to the higher efficiency
of PM motors, even though some permanent magnets do not use REEs and are as such
less coercive [43]. Currently, the market share of EVs using permanent magnets reaches
90% [24]. This market is expected to grow at historical rates in the years to come since
e-mobility is one of the main policy pillars to mitigate Co2 emissions by 2050 [2, 13, 1]. By
2025, the number of EVs on the road should be 77 million, with the EVs fleet representing
13% of all vehicles in China and 8% in Europe [17]. In a 2°C scenario the global EV fleet
might be as high as 970 million by 2050 [37]. In such a scenario, the demand for rare earth
elements would be driven by the automotive sector since the deployment of EV in the
world will necessitate large volumes of REEs [24]. According to [82], demand for REEs in
permanent magnet applications for wind and EVs will increase between 3.7% and 12.5%
annually, depending on the scenarios and the projection method used. However, the de-
velopment of electric mobility requires a large amount of critical raw materials. Therefore
the deployment of EVs is vulnerable to the supply of critical minerals such as rare earth,
lithium, nickel or cobalt [10]. The supply of dysprosium is of particular concern for the
future production of permanent magnets owing to its low crustal abundance concentration
and China’s monopoly on heavy rare earth mining and processing [10, 24]. At the current
exploitation trend, dysprosium supply cannot meet future demand for EV motor produc-
tion. [39, 10, 22]. EV motors and wind turbine generators are expected to be the largest
end-use of dysprosium in the years ahead since dysprosium doesn’t have other significant
applications. According to [15] a large proportion of dysprosium produced in China was
derived from illegal mining, and the government’s actions to curb this production resulted
in a decrease in dysprosium supply. In addition, the fast development of e-mobility in
China will undoubtedly increase its domestic demand for dysprosium. Therefore, a dys-
prosium shortage might occur if no alternative supplies are developed. One solution may
lie in the development of the Browns Range mine in Australia. Production from this

16
mine would be sufficient to produce as high as 2.7 million motors for EVs [15]. Another
issue regarding the supply of rare earth is co-mining, since rare earth elements cannot
be mined individually, an increase in production for one element proportionally increased
the volume of other rare earths in the market. This led to an oversupply of co-mined
elements and a price fall in the rare earths market [10, 22].

4 The Rare Earth market

4.1 The Central role of China

Initially, the United States was the world’s first supplier of REEs. Starting in the 1950s,
the Moutain Pass deposit provided the world with REEs. The country was also the leader
in rare earths applications and innovation. China’s interest in rare earths emerged in the
1960s when it developed the mining of non-ferrous metals in the Baotou region, setting up
the home of large factories that process coal, steel, and rare earth metals [50]. The United
States leading position in the market rapidly declined from 2002 when Moutain Pass closed
after severe environmental problems and the emergence of competitive Chinese producers.
Progressively, mines and processing facilities in the States were acquired by conglomerates,
including several Chinese entities. REEs companies relocated their operations to China.
For instance General Motors, delocalised its Magnequench division, which is specialised
in minerals processing, after being bought by a Chinese consortium [49, 74]. China used
its low environmental standards and cheap labour to capture market shares and gain a
dominant position in the market. The Chinese State has supported the development of
a competitive rare earths upstream industry, mainly through the Raw Materials Office
of the Ministry of Industry and Information Technology (MIIT), and the Ministry of
Commerce. One essential measure of China’s raw material trade policy is to introduce
export regulations. In the rare earth market, export quotas and export licensing have
been in place since 1999 [50]. The country has progressively reduced its exportation
quotas with the intention of attracting foreign companies to set up factories in China,
share their know-how and develop manufacturing of products with a higher added value
[74]. China has secured an absolute monopoly in rare earth production, from mining to
processing. In 2005, the country accounted for 95 % of global REEs mining. However, in
2010 the so-called Rare Earth crisis led to global concerns regarding China’s monopoly
and marked a complete change in the rare earths market. The crisis emerged following
a diplomatic incident between China and Japan over a maritime dispute, and it was
reported that China temporarily ceased REEs exports to Japan. Although China did
not issue an official statement, the embargo toward Japan was de facto, according to

17
Japanese companies [50]. The supply disruption led to insecurity in the market, and rare
earths prices dramatically spiked. Neodymium and praseodymium prices doubled in less
than a year [16]. This episode contributed to the reduction in Western country sourcing
from China, resulting in a Rare Earths exploration boom to develop a REEs supply chain
outside the country [63]. After 2010, several rare earth projects emerged and mines such
as Mountain Pass resumed activities. Although China lost market shares over the years,
it still accounts for 60% of REEs mining and 90% of its processing. In 2022, the total
value of REEs compound and alloy exports from China exceeded USD 1 billion, whereas
the USA’s total export value was USD 570 million and Japan’s USD 272 million[5]. China
also pursued its ambitions to develop REEs end-products with higher value-added, and
it did so with permanent magnets. In a decade, China overtook Japan and became the
leader in permanent magnets exports, multiplying by eight its export value [57]. China’s
central role in the rare earths market is also due to its geological particularities, as it
hosts the world’s biggest reserve of REEs. Its ionic clay deposit is enriched in HREE, and
its economic exploitation is economically viable due to low-cost in-situ and heap-leaching
[55]. The country capitalized on this deposit to become a leader in HREEs extraction and
processing. As of today, the country owns the only HREEs processing facilities. To secure
this monopoly, Chinese companies started outsourcing rare earths mining in Myanmar’s
Kachin region in a similar HREE-enriched ionic clay deposit. Through shareholding
and joint ventures, Chinese companies are also involved in several other REEs projects
worldwide (e.g., Tanzania, Madagascar, and Australia). With its major implication in
each step of the REEs supply chain, the country has become an unavoidable actor in the
REEs market, similarly to its position in other minerals markets (see Figure 8 and Figure
9). In short, China remains the biggest global supplier of raw and processed REEs, and
through Chinese companies’ involvement in REEs projects abroad, China maintains its
market power.

18
Figure 8: Mine production of Rare Earth Oxide, USGS(2022)

19
 Figure 9: Share of China for minerals processing, IEA (2019)

4.2 REEs market

Although the dominant position of China is one main feature of the market, other ele-
ments characterise the REEs market. While other raw materials, like copper and gold, are
traded in a transparent commodity exchange market like the London Metals Exchange,
there is no such market for REEs. They are commonly traded in over-the-counter (OTC)
markets. The buyers and sellers are matched through brokers or trading platforms such
as Metal Pages, Asian Metal and China Rare Earth. Bilateral agreements and offtakes
are concluded in an opaque manner, which makes it harder to estimate exchanged vol-
umes and values. The market’s opacity is reinforced by uncertainty regarding supply,
demand, resources and reserves, production capacities and cost, prices, and stockpiling
size [51]. The resources and reserves of rare earths are not precisely known. Although
some countries, including China, do not publish detailed information regarding their re-
sources, the USGS does provide global data on REEs reserves, resources and productions,
based on national publications of geological data. Uncertainties regarding production
remain since production costs vary according to the deposit type and available technolo-
gies. Illegal mining and processing of rare earths in China contribute to uncertainties
regarding the total volume produced. Several mining operations operate off the books
in Southern China, estimated to represent half the global production of heavy rare earth
[61, 74], and around 15-20% of all rare earth elements. The production of illegal mines also
lower prices; therefore China’s policies to curb illegal mining have an impact on global
prices [57]. Historically, rare earth prices have been relatively low, driven by China’s
considerable resources and its competitive prices. However, during the REE crisis, prices
dramatically increased, up until 2011 they were nearly 11 times higher than in 2009 [16].

20
According to [57] rare earths prices are dependant and volatile on Chinese actions. Price
volatility caused uncertainties for consumer industries, and price peaks have a dramatic
impact on those industries. IT companies in the United States experienced a reduction
in their gross margins as a result of price increases in 2011. [67]. Price volatility also
hindered the development of rare earth mines outside China. The stockpiling of REEs,
notably heavy rare earths by China, the United States and Japan contribute to price
volatility and market uncertainties. The REEs market is also characterised by elastic
demand and inelastic supply. There is a different time scale between the exploration of
a deposit and the available final raw material on the market. Exploration activities are
followed by a preliminary economic assessment, feasibility study, the allowance of an ex-
ploitation license, the construction of the mine and low-scale production development to
reach large-scale production eventually. This process can take 5 to 15 years. This results
in a relatively inelastic supply of REEs in the short term and an elastic demand driven
by constantly evolving high-tech industries, where future rare earth applications remain
unknown, so is future demand.

5 Challenges

As we have seen the energy transition is putting pressure on the extraction of critical
minerals required in low-carbon technologies. Rare earths used in wind turbines and EVs
are driving the demand, whereas the supply is constrained by production concentration in
China and the country’s protective resource policy. This current situation raises several
issues regarding the availability of the resource for the development of renewables and
electric mobility. We have identified four challenges of rare earths supply for the energy
transition, namely the substitution of the minerals in clean technologies, the recycling of
REES from end-of-life products and mining waste, the diversification of the supply and
the difficult establishment of a supply chain outside China, and the environmental and
social impact of REEs production. These four challenges are further developed in the
following section as well as relevant policy implications.

5.1 Substitution

The critical availability of rare earths encourages industries to search for alternatives to
rare earths in manufacturing high-technology products. However, the direct substitution
of REEs by another chemical element is rather unfeasible since no element possesses
the same chemical properties as rare earths. Effective substitution is obtained when

21
an element replaces the critical element with a less critical or a more abundant one
while still maintaining its intended purpose [12, 11]. This direct substitution of elements
cannot be achieved between REEs and other elements; only the elements of the rare earth
family share the same chemical properties and therefore fulfil the same usage without
reducing the final efficacy. For instance, dysprosium is sometimes replaced by terbium
in the manufacturing of NdFeB. Currently, all rare earth elements are critical, hence the
substitution between elements from the rare earth family does not reduce the critical
risk. For this reason, manufacturers essentially focus on reducing the amount of REEs
in their products and developing alternative manufacturing for their products, named
”technology-for-element substitution” [62]. Yet, by reducing the quantity of rare earths
in products such as permanent magnets, industries accept a relative performance loss for
their final products.

5.1.1 Automotive sector

In the automotive sector, we can observe a decreasing trend in the use of REEs in hybrid
and electric vehicles. One solution to reduce the amount of REEs is to use a hybrid
magnet structure by replacing a portion of the RE-magnet with ferrite materials [65]. For
instance, the motor of the BMW i3 is made with a “hybrid” structure that uses around
half the REE compared to regular EVs [43]. Another option is to use alternative mag-
nets, whether with low REEs content like samarium-cobalt-ferrite magnets or without
REEs like aluminium-nickel-cobalt and ferrite magnets. Those magnets present advan-
tages, the samarium-cobalt magnet can withstand higher temperatures than NdFeB [86],
likewise, ferrite magnets are the least expensive permanent magnet [78]. Nevertheless,
those magnets have lower magnetic strength, and a lower ability to resist demagnetisa-
tion once magnetised [86]. They also contain other critical raw materials such as cobalt.
In this search for alternatives to rare earths, the automotive sector has designed free-REEs
motors for electric vehicles. The induction motor, for instance, does not use rare earth
elements, even though it requires a large quantity of copper (11-24kg per motor), some
manufacturers have replaced it with aluminium, a less critical raw material [43]. Another
promising alternative is the squirrel cage induction asynchronous motor that is already
used in several EVs including TeslaS-2014, TazzariZero , Mercedes-Benz B-Class Electric
Drive,Mahindra e2o , and ToyotaRAV4 [68]. This system offers a low-cost and robust al-
ternative to permanent magnet synchronous motors. Similarly, switch reluctance motors
are relatively cheap, easy to manufacture and resist high-temperature [68]. However, they
are still in the early stage of development [68, 43]. Thus, the global trend in the auto-
motive sector is to scale down or eliminate the use of rare earth permanent magnets in
EV motors. Among the alternatives noted earlier, ferrite magnets and induction motors

22
seem to be preferred by car manufacturers.

5.1.2 Wind power sector

In much the same way, in the wind power sector, the global trend is the reduction of
REEs in wind turbine generators. By improving the material efficiency, manufacturers
can reduce the use of REEs, this can be achieved by improving the permanent magnet
design or lowering the working temperature to reduce the use of high-temperature resis-
tant elements like terbium and dysprosium [64]. The advancement in the designing of
permanent magnets is also leading to a reduction in the volume of praseodymium and
neodymium used in wind turbines. As for permanent magnets in EVs, the direct sub-
stitution of REEs in permanent magnets is not the focus of ongoing research, since no
substitute for REEs exists. Thus, research and development focus on improving the ca-
pacities of existing magnets such as ferrite or aluminium-based magnets [64].[66] found
that ferrite magnets can be an attractive substitute to the REEs magnets, with higher
average efficiency and a similar cost in the case of direct-drive wind turbines. The main
strategy of the wind power industry is however to switch to alternatives to PMSG that
already exist. The doubly-fed induction generator is a rare earth-free type of wind turbine
based on an electromagnet. Its low manufacturing cost is its main advantage; however,
this generator remains less efficient than REE-permanent magnets and requires higher
maintenance costs. Among other alternatives, there are electrically excited synchronous
generators (EESG) in direct-drive turbines and squirrel-cage induction generators. High-
temperature superconductors might become future alternatives to permanent magnets,
however, they are still in the early development stage [64, 43].

5.2 Diversifying

Countries’ overreliance on China’s rare earths, including raw minerals and processed min-
erals, presents a risk for downstream industries that use REEs. Any disturbance in the
exports of raw minerals has an impact on the other segment of the value chain. In the
rare earths case, China is also a leading actor in the export of manufactured products
with REEs including permanent magnets that are critical to low-carbon technologies. In
addition to weakening industries, this dependence also may hinder the energy transition.
The 2010 REEs crisis deeply changed the rare earth market. Not only did the price
peak trigger an exploration boom from junior and senior companies leading to dozens of
REE projects, this event was also a turning point in countries’ resource policies. The
diversification of rare earth supply became crucial to secure global supply chains, and

23
different strategies have been adopted. To further analyse critical raw material-securing
strategies, resource-rich countries and resource-poor countries will be treated separately.
Among rare earth-rich countries, Australia and the United States have pursued simi-
lar strategies. Those countries had produced rare earths prior to closing mines in the
2000s due to environmental concerns, little public acceptance and inability to compete
with China. Hence, both countries had infrastructures, know-how and widely developed
mining industries to exploit rare earths on national soil. Consequently, private company
Molycorp resumed rare earth mining in Moutain Pass, California in 2017 and increased
the quantities of rare earth mined in the subsequent years. The Mountain Pass production
doubled between 2018 and 2021, from 18,000 tons of TREO ( total rare earths oxide) to
41,000 tons ( USGS). In Australia, Lynas company resumed mining at Mound Weld, and
Northern Minerals launched the Brown Range Project in the northern region of the coun-
try with the aim of becoming a significant producer of dysprosium, a heavy rare earth
that is currently only produced in China. Regarding resource-rich countries without a
previous history of rare earth mining, the ambition was to explore deposits and carry
out economic assessments of future rare earth projects. Globally, an exploration boom
occurred after the 2010 crisis involving mining companies willing to invest revenues from
producing mines into new mining projects and junior companies attracted by “high risk
/ high reward” projects [63]. For those countries, however, the mining mineral strategies
largely differ. Developed resource-rich countries such as Sweden and Canada rely on pri-
vate national stakeholders to develop rare earth projects whereas developing resource-rich
countries including South Africa, Tanzania, Burundi, Vietnam, Thailand and Malaysia
seek direct foreign investments. Canada for instance has built on its advanced mining
industry to develop its first national rare earth project, the Nechalacho Project. In Swe-
den, the recent exploration of the Per Geijer deposit reported a resource of rare earth
evaluated at one million tons 1 . The Swedish authorities should deliver an exploitation
licence to the LKAB companies in 2023, permitting the deposit to become the first rare
earth mine in Europe. Despite a profound decline in the mining industry in Europe after
the closing of coal mines, the European Union has decided to support non-energy minerals
mining in Europe. The EURORARE project and the European Rare Earth Competency
Network were established by the European Union to improve REEs supply security by
evaluating domestic resources, developing exploitation technology as well as creating a net-
work of qualified engineers and scientists(EURORARE, ERCON). In contrast, developing
resource-rich countries cannot rely on a strong and developed mining industry; therefore
their national strategies aimed at attracting direct foreign investment, like supporting
joint ventures and allowing exploitation permits to foreign firms to develop domestic rare
earth mining [3]. In particular, African countries have received a huge amount of direct
1
https://lkab.com/en/press/europes-largest-deposit-of-rare-earth-metals-is-located-in-the-kiruna-
area/, Accessed June 1, 2023

24
foreign investment from China in the mining sector, specifically for critical raw materials
such as cobalt, copper and rare earths [23]. Malaysian and Vietnamese rare earth plants
are respectively owned by Australian and Japanese firms. Resource-poor countries have
also developed mineral strategies to secure the supply of critical minerals, notably to sup-
port national planning in the green transition. The main strategy consists of bilateral
agreements between producer countries and consumer countries (e.g Korea and Canada,
Brazil and Germany, France and Mongolia, Vietnam and Japan). Cooperation between
countries is at the centre of the global willingness to secure resilient critical raw material
supply chains. Australia, Canada, Finland, France, Germany, Japan, the Republic of Ko-
rea, Sweden, the United Kingdom, the United States, and the European Commission have
established a Mineral Security Partnership to “ensure that critical minerals are produced,
processed, and recycled in a manner that supports the ability of countries to realize the
full economic development benefit of their geological endowments” 2 . Japan was the first
to secure rare earths supply outside China as high-end product with REEs represents 22%
of Japan’s total export value [72]. The country created the Japan Oil, Gas and Metals
National Corporation (JOGMEG), an independent administrative institution responsible
for resource stockpiling of 34 metals, including rare earths. Through this entity, Japan
has invested in rare earths companies such as Lynas and rare earth projects around the
world. In addition, Japanese high-tech and automotive companies have several joint ven-
tures with rare earth producer companies. Diversification strategies are not only focused
on the raw materials but also on the downstream industry. Canada’s strategy consists of
intensifying the mining of critical raw minerals as well as reinforcing the associated value
chain. Two of the three value chains identified as having high potential for national inte-
gration are clean energies including wind turbines and EVs, and advanced manufacturing
inputs and materials including permanent magnets [4]. This strategy will be supported
by government investment and tax reduction for mining, processing and manufacturing
projects across the country. The United States follows a similar strategy embodied in the
Anti-Inflation Act. Additionally, the rare earth supply chain diversification planning is
also in the hands of the Department of Energy and Department of Defence, outlining the
strategic importance of the resource. Countries from the European Union have developed
a set of goals to ensure the securing of critical raw materials for the energy transition,
through the European Critical Raw Material Act (CRMA). This act plans to establish
strategic raw materials partnerships with countries with important reserves, pursue a
predictable legal framework for trade and investment in REEs in Australia, and support
investment in REEs mining/processing in Ukraine. As for Canada and USA, the diver-
sification strategy includes all value chain segments. The European Union has set the
following goals : 10% of EU’s annual consumption for extraction, 40% of the EU’s annual
2
Retrieved from https://www.state.gov/minerals-security-partnership/, Accessed June 1, 2023

25
consumption for processing, and 15% of the EU’s annual consumption for recycling have
to be produced within the European Union. In addition, no more than 65% of the Union’s
annual consumption of each strategic raw material at any relevant stage of processing can
come from a single third country. Diversification strategies might be limited by China’s
control over the rare earth market. Developing an alternative value chain means changing
the structure of the market and facing Chinese competition. Chinese companies are still
present in each segment of the market, and any rare earth produced today has to pass
through China. Moreover, the rare earth industry necessitates high investment associated
with high risk, as the economic viability of deposits is rare.

5.3 Recycling

The recycling of REEs is a solution to increase the supply of REEs, secondary sources
of REEs could represent an important proportion of the future supply of REEs. There
are two types of recycling to be considered: pre-consumer recycling involving recycling
performed on manufacturing scrap and post-consumer recycling which means recycling
end-of-life products. The latter has a bigger potential as a tremendous amount of tech-
nologies with REEs contents have already been produced - electronic wastes including
nickel-metal hydride batteries, hard drives from laptops and desktop computers, cellular
phones, and speakers [27]. The so-called “ urban mines” represent a potential for recy-
cling of REEs and second-life use in green technologies. Urban mining is when wastes
that typically end up in landfills are instead processed for recovery of contained materials
[27]. As of today, less than 1% of REEs are recycled - the lowest proportion of recycled
minerals among the critical minerals for the energy transition [43]. The main reason for
this low rate is quality loss, available recycling technologies, low prices for REEs from
primary resources, and the long useful life period of REEs bearing products. However,
many products like permanent magnets, batteries, auto catalysts, and phosphors in dis-
plays and lighting are applications where recycling may be economically viable. Feasibility
will depend on the composition of REEs in the products, how challenging collection and
sorting of those products may be, and the viability of recycling technologies to extract
REEs at a high yield [27] [27] shows that the large volume of many waste materials would
provide a large quantity of REEs to meet global demand, even with low yields. Post-
consumer recycling consists of three steps: collection, pre-processing and end-processing.
There are three main techniques to recover REEs from end-of-life products: the mechan-
ical technique which usually consisting of grinding, sieving and bed elutriation [79], the
hydrometallurgical where REEs bearing alloys are dissolved in large amounts by mineral
acids or microorganisms and pyrometallurgical techniques that use very high temperatures
to recover metals [62].

26
5.3.1 NiMH batteries

The large volume of disposable NiMH batteries is a source of REEs. This secondary
source of REEs has the potential to increase its supply. Four REES can be recovered from
NiMH batteries, cerium, lanthanum, neodymium and praseodymium and then be reused
to produce new REE-products. There is a large available volume of NiMH batteries which
is mostly explained by their useful life, being about two to three years [90]. According
to [27], NiMH batteries could provide 3.6X the global demand for lanthanum, 2X the
demand for cerium, 1.5X for neodymium, and 1.1X demand for praseodymium. The
recycling of REEs from NiMH batteries has been developing for a decade. For instance,
Solvay, a Belgian-French multinational and the only HREEs separation facility outside
China, started its LOOP Project in 2010 https://urlz.fr/mgid, Accessed June 1, 2023. The
project consists of recycling End-of-life NiMH batteries (La, Ce, Pr, Nd) and low-energy
consumption lamps from the Solvay La Rochelle plant’s historical loss of yield. This is
a collaboration with Umicore that recycles the nickel part of the battery. For the past
decade, various techniques have emerged for REE recycling from NiMH batteries [45, 62].
New techniques are promising, including techniques that result in reducing wastes such
as water waste and liquid waste [45].

5.3.2 NdFeB

NdFeB can be recycled from EV/HEV vehicles, wind turbines and hard disk drives. There
is a huge recycling potential of NdFeB from hard disk drives because of existing and
efficient collection and huge annual production of 600 million HDDs. Neodymium can be
recovered from NdFeB [25]. Similar to NiMH batteries, recycling started in 2010. Hitachi
has developed technologies to recycle REEs from HDD motors, air conditioners and other
compressors. It has developed machinery to separate and collect RE magnets from end-
of-life products and extracted REEs from the magnets using a dry process (meaning
no solvents are used)[7]. This technology allows for a cost and liquid waste reduction.
Technologies are developing and are promising with high purity in recovered elements
(99%), and successful reuse in new magnets ( fully circular economy) 3 . According to
[92] recycling of NdFeB can meet almost 50% of the demand by 2100. However, recycling
and recovery of REEs (Nd, Pr, Dy,Tb) from end-of-life magnets are challenging due to
their relatively small sizes. According to [73] model, 22 percent of global light REEs and
23 percent of heavy REEs demand for use in NdFeB magnet production can be met by
supply from secondary sources in 2030. The recycling of heavy rare earths may impact
the market since primary sources are concentrated in China.
3
https://urlz.fr/mgia, Accessed June 1, 2023

27
5.3.3 Pre-consumer recycling

REEs are also present in secondary coal combustion products such as fly ash, bottom ash,
and incinerator ash. Phosphogypsum, coal ash and red mud from aluminium production
stand out as promising candidates for recovery due to high concentrations of valuable
REEs and sufficient quantities to potentially meet demand. Among the sources of REEs
materials that have been studied extensively is coal ash. Coal ash is a by-product of
the combustion process in coal power plants and has two main components: fly ash and
bottom ash[27]. Rare earths can be recovered from coal fly ashes. The potential is
such that the U.S. Department of Energy has initiated programs to examine methods
of recovering REEs from coal-related wastes4 . Currently, there are promising systems to
recover REEs from coal ashes that address resource recovery and solid management waste
[54] even if these systems are still in the development stage.

5.4 Environmental damage

Rare earth element production has a direct impact on the environment along the entire
life cycle of rare earths, beginning from the mining and ending at the disposal of REE
products. The environmental damage has several forms, including chemical contamina-
tion, alteration of soils, gas emissions, soil acidification and water contamination. The
chemical damage has been estimated by several studies, for instance, the Chinese Rare
Earth Society has evaluated that every ton of rare earth elements produced generates ap-
proximately 8.5 kilograms of fluorine and 13 kilograms of flue dust. Additionally, sulfuric
acid refining techniques used to produce one ton of rare earth elements generates 9,600
to 12,000 cubic meters of gas laden with flue dust concentrate, hydrofluoric acid, sulphur
dioxide, and sulfuric acid. Other estimates indicate that producing one ton of REEs cre-
ates 60,000 m3 of gases mixed with H2SO4 and HF, 200 m3 of acid water, and 1.4 tons of
radioactive waste [46]. Other studies focus on the broader environmental impact of REEs,
and several life- cycle- assessments (LCA) of rare earth have been performed [52, 93]. The
main findings show that Rare earth production is an energy and chemical-intensive pro-
cess that generates large quantities of mining tailings and results in waste that might be
radioactive like thorium and uranium. LCA outlined that the environmental problems
caused by REEs production vary according to the production stage and the type of rare
earth.
4
https://netl.doe.gov/node/12137, Accessed June 1 2023

28
5.4.1 Mining

Mining minerals cannot be done without exposing rocks that have not been exposed pre-
viously to bacteria, oxygen, water and wind. Chemical and physical alteration caused
by these weather forces can lead to environmental contamination. Rare earth element
bearing minerals such as monazite, xenotime, and bastnasite can contain low levels of ra-
dioactive elements thorium and uranium. The radionuclides, rare earth elements, metals,
sulphides, carbonates, and other possible contaminants may be released into the envi-
ronment at the mine site and refinery [85]. Mining activities also entail alteration of the
natural environment, removal of vegetation and topsoil results in changes in topography,
and soil compaction reduces infiltration and storm runoff absorbing capacities. This leads
to increased frequency and magnitude of flooding and other geological disasters during
storm periods. Mining activities also cause permanent loss of ecosystems, soil erosion, air
pollution, and biodiversity loss. The rare earth mining in the Ganzhou region has left 302
abandoned mines and 191 million tons of tailing and large-scale deforestation.

5.4.2 Processing

The processing (beneficiation, separation, chemical treatment, reduction) is the stage

that creates the largest volume of pollution. REE processing techniques are chemical and
energy-intensive. The type of deposits and REEs concentration determine the processing
techniques. There are no unique techniques, and each of them may impact the environ-
ment. Globally, the Chinese Society of REEs estimates that the completion of refining
one ton of rare earth elements generates approximately 75 cubic meters of acidic waste
water and about one ton of radioactive waste residue. The environmental damage will
also depend on the pollution control the mine operator adopts. During the processing of
REEs, chemicals such as acids, alkalis and solvents are used, creating chemical waste and
gas emissions. The consumption of water to process REEs also causes water contamina-
tion. An additional concern is the impact on the environment from processing waste. In
particular, a large amount of tailings is produced in the beneficiation and extraction of
bastnasite and monazite concentrates. Tailings of both of these, monazite in particular,
contain naturally occurring radionuclides and the release of this to the environment by
air, wastewater, and rain leaching can have longer-term health effects on humans and
ecosystems of the local environment [52].

29
5.4.3 After mining activities ceased

Even after mining activities ceased, mines still represent an environmental risk. The leach-
ing can cause long-lasting underground water contamination, mine collapses, landslides
and soil acidification. Sulphate pollution persists long after mining ceases through exacer-
bated nutrient pollution of downstream rivers and reservoirs increasing the development
of toxic substances for aquatic organisms and plants.
A monazite cracking plant to extract rare earth elements operated in northern Malaysia
between 1982 and 1994. During this period waste containing thorium and radium was
generated , and various materials and equipment within the plant area became contami-
nated with thorium[81]. Mitsubishi spent $100 million to clean radioactive waste leaching
in this mine5 .

6 Policy recommendations

6.1 Substitution and Recycling

The automotive and wind power sectors have fully acknowledged supply risk from critical
minerals used in low-carbon technologies. Companies from those sectors have adapted
their product designs and invested in research and development (R&D) to mitigate the
supply risk. It results in the availability of permanent magnets without REEs and recy-
cling technologies that recover REEs from secondary sources. Therefore public policies
should be framed to support public and private R&D projects which aim to reduce the use
of REEs from primary sources and increase REEs supply from secondary sources. These
policies might take the form of national subsidies or tax reductions for innovative compa-
nies. To guide the design of such policies, it’s important to evaluate the domestic amount
of industrial waste and end-of-life products that are potential sources of REEs. Addi-
tional measures should be taken to ease the recycling process and reduce its cost. First,
consumers must be encouraged to recycle their products when they reach end-of-life since
any component might be recovered. Second, a full recycling chain must be developed,
from collecting end-of-life products to recovering materials. Last, industries themselves
should be encouraged to design products which ease the future recycling of their critical
key components. Although recycling is a long-term solution to meet the demand of REEs
for clean technologies, recycling is unlikely to meet REEs demand in the short term and
5
http://www.nytimes.com/2011/03/09/business/energy-environment/09rareside.html, Accessed June
1, 2023

30
should be seen as a medium and long-term solution.

6.2 Diversifying

The diversification of rare earths supply implies that world resources are identified and
measured; therefore, geologic surveys should be done nationally to evaluate REEs resource
potentials. In this area, several countries lack expertise and need external support. For
instance, the French geological survey bureau signed an agreement with its Congolese
counterpart to develop skills, deploy a high-performance Geological Information System,
enhance knowledge of the DRC’s subsoil and encourage the emergence of responsible min-
ing projects 6 . The research and the target exploration step is one of several that follow
every mining project. From this first step to the final step of building an active mine,
the probability of success is very low and the timeframe very long. It can take a decade
to discover an economic orebody and several additional years to develop a mine. Rare
earth projects need financial, legal and political support throughout the full process. The
public-private cooperation would be profitable for the development of REEs projects, as
noted earlier, high risk and uncertainties are characteristics of the REEs market. Thus,
private companies need public support to face market uncertainties. Also, from a mining
company declaring its intention to start minerals exploration to the setting up of a mine
requires different permits, including mining permits and environmental permits. The
process of approving permits needs to be smooth and transparent. Developing domestic
REEs projects is part of a broader political context. A set of public policies, including
formation, R&D, environmental policies and industrial policies, must back the develop-
ment of such projects. Regarding mining operations abroad, bilateral agreements and
partnerships will enhance collaboration between resource-rich and consumer countries.
REEs resource-rich countries have come under the spotlight since the rare earth crisis
has awakened interests from foreign companies and governments willing to secure critical
minerals supply chains. However, the development of mineral mines supported by for-
eign companies and governments does not always contribute to the economic and social
development of the resource-rich country. Thus, consumer and producer countries must
agree on an equitable distribution of benefits to ensure inclusive growth. Moreover, as the
mining sector is becoming central in the energy transition, regulations are more than ever
needed to ensure responsible and sustainable mineral supply chains. ESG standards would
reduce consumers’ and stakeholders’ concerns about means of production and provenance.
The traceability of raw materials is becoming a major concern as demand increases for
clean technologies, because illegal mining and mining in conflict-affected countries might
6
https://urlz.fr/mgic, Accessed June 1, 2023

31
represent a growing share of mineral imports. Recent reports have drawn attention to
local governance issues and societal consequences of mining REEs in the borderlands of
the Kachin region in Myanmar [19, 71]. In this domain, private and public cooperation
is required to shape ESG norms and ensure clear traceability of raw materials.

6.3 Environmental and social impact

The environmental impact of REEs production is little known since current studies are
based on data from the early production of REEs in Mountain Pass or from China’s mines
which have different environmental norms than other mining countries. The development
of new REEs project press for available knowledge regarding the environmental impacts
of REEs production and existing technology to mitigate environmental risks. Those tech-
nologies will help shape environmental standards in the mining industry, which is already
moving toward sustainable practices by developing dry-processing techniques that do not
necessitate solvents and using data management tools to reduce mining’s environmental
impact. Nonetheless, policymakers should work with the mining industry to promote
best ESG practices along the REEs value chain. Besides ESG, due diligence is vital, as
child labour and minerals from conflict-affected countries are critical risks in the mining
industry. Mining companies must ensure that they have taken measures to prevent or mit-
igate the risk of contributing to conflict and human rights abuses. Setting international
standards is key to ensuring a responsible, sustainable and secure supply of minerals for
the energy transition. Mining operations might take place near protected areas or in the
Indigenous territory, leading to conflict regarding land use. That’s why the involvement
of local communities and transparency from the mining industry regarding environmental
impacts and restoration of the mine after activities cease are important.

7 Conclusion

As we have seen, neodymium, praseodymium, dysprosium, and terbium are the four rare
earth elements critical to the energy transition through their application in wind turbine
generators and electric vehicle motors. As the world is moving from fossil fuel energy to
low-carbon energy, the demand for these minerals is expected to grow substantially over
the next decade, and so is the critical mineral supply. However, this article identified four
main challenges to the supply and demand of REEs in the energy transition. As a critical
mineral, the supply risk is notable for rare earths, partly due to extraction and processing
concentration in China. Therefore, substituting REEs is a feasible and already adopted

32
solution in the automotive and wind sectors to reduce industrial vulnerability to disruption
in the supply chain. Moreover, the exploration boom has led to the development of several
REEs projects outside China to diversify sourcing. Even if few projects result in active
mines or processing plants, new supply chains from extraction to processing of the minerals
are emerging in North America and Australia. In addition to an increasing supply of
REEs from primary sources, the recycling of REEs from end-of-life products or industrial
wastes would increase the global supply of REEs needed in the energy transition in the
long term. Despite a current low recycling rate, increasing REEs recycling is a stated
objective for several countries. One major concern regarding REEs production remains
the environmental impact. Environmental damage associated with REEs extraction and
processing put the brakes on REEs projects development. All of these constraints and
challenges must be considered by the industrial sectors relying on REEs to manufacture
their products. Another challenge that could be investigated is the REEs co-mining.
Since REEs are a co-product of each other, an increase in the supply of one REE is
translated into an increase in the supply of another, with a risk of oversupply of certain
elements. By-products of REEs such as iron, titanium, zirconium and thorium are also to
be considered from an industrial point of view, as they could be economically beneficial.

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